The plaintiffs are homeowners who live in the Spring Valley neighborhood of Huntington, West Virginia. After the city constructed a new stormwater management project, the neighborhood began experiencing flooding, most recently in May, 2011. The plaintiffs sued the city, alleging that the city was negligent in designing and maintaining the stormwater system. As a result of the city’s negligence, the plaintiffs’ homes now lie within a 100 year flood plain, requiring them to be elevated by two feet. Furthermore, the reoccurrence of flooding has resulted in the value of the homes being diminished by 35% to 75%.
The case was tried, and a jury awarded damages for both repairing the homes and for their diminished value. The trial court concluded that West Virginia law allows for recovery of either the cost of repair or diminished value, whichever is less. Accordingly, the trial court remitted the jury award for repair costs to zero. The plaintiffs then appealed.
What is the proper measure of damages in cases involving loss to real property?
In 1977, the Supreme Court decided Jarrett v. E. L. Harper & Son, Inc., 160 W.Va. 399, 235 S.E.2d 362 (1977). The law from Jarrett has remained unchanged for over 35 years:
“When realty is injured the owner may recover the cost of repairing it, plus his expenses stemming from the injury, including loss of use during the repair period. If the injury cannot be repaired or the cost of repair would exceed the property’s market value, then the owner may recover its lost value, plus his expenses stemming from the injury including loss of use during the time he has been deprived of his property.”
Therefore, Jarrett established a “ceiling”--i.e., damages could not be recovered in excess of the property’s fair market value. Especially where the property was being used as a residence, this led to unfair results. If repair costs exceeded the property’s value, then the owner faced a dilemma: (1) don’t make all of the necessary repairs, or (2) make all of the repairs, but then pay for some of them out of pocket. The Supreme Court concluded this guaranteed that the homeowner would receive “inadequate compensation.”
The Court’s new syllabus eliminates Jarrett’s artificial “ceiling” and, instead, insures that the homeowner may recover all reasonable costs:
"When residential real property is damaged, the owner may recover the reasonable cost of repairing it even if the costs exceed its fair market value before the damage. The owner may also recover the related expenses stemming from the injury, annoyance, inconvenience, and aggravation, and loss of use during the repair period. If the damage cannot be repaired, then the owner may recover the fair market value of the property before it was damaged, plus the related expenses stemming from the injury, annoyance, inconvenience, and aggravation, and loss of use during the time he has been deprived of his property. To the extent that Syllabus Point 2 of Jarrett v. E. L. Harper & Son, Inc., 160 W.Va. 399, 235 S.E.2d 362 (1977) states otherwise, it is hereby modified."
The Court also addressed the question of whether Jarrett prevented recovery of both repair costs and diminished value. If full repairs are made, then, in most cases, there will not be any accompanying decrease in the property’s value. Here, however, the plaintiff’s experts testified that the increased risk of flooding in the future had impacted the neighborhood and depressed the value of homes located in it. These losses should be compensated. The Court noted this was similar to so-called “stigma” damages that are awarded environmental contamination cases. Thus, where diminished value an be proved, an award of damages may be made for diminished value along with the actual cost of repair.
This is a clear win for property owners. With a fluctuating market, it is certainly likely--if not probable--that the costs of repairing a home could exceed its fair market value. The Court’s new syllabus tweaks Jarrett so that its “ceiling” is eliminated and the homeowner can receive full compensation for the loss. The Court also recognizes that, in some situations, the homeowner would be entitled to recover both repair costs and damages for diminished value. Again, the Court seems committed to insuring that the homeowner is not shortchanged and, instead, receives full damages for all of the losses suffered.